7 Benefits to Filing Your Taxes Early
Many people put off filing their federal income tax forms until the last minute every year. And every year it brings on the same overwhelming feeling. Despite this trend, that does not have to be you. Not only does it relieve a heck of a lot of stress to file your taxes on time and earlier but there are loads of benefits (and it doesn't just mean you get your tax refund faster) that you don't want to miss out on!
Even though it may seem hard, filing taxes doesn't have to be daunting. You can finish your taxes early and receive your maximum refund quickly and conveniently by taking stock of your finances, assembling your papers, and selecting the best tax preparation option.
Let’s get into the many reasons why you should file your taxes earlier rather than later below:
1. More Availability With Tax Professionals
Although April 18th always seems far off, it won't be long until the approaching tax filing deadline arrives. On paper, tax season appears to have plenty of time, but if you require assistance or take your time obtaining your documents, you may find it difficult to file on time. The more time we have left before the deadline, the harder it will be to acquire an appointment if you go to a tax expert for assistance with taxes. By the middle to the end of February, make an appointment. This will provide you and your tax preparer with ample time to work out any last-minute kinks and file your taxes on time.
If you are held hostage by time and not able to do your taxes, we get it. Our team of experts can help you.
2. Avoid the Stress of a Tax Deadline
When you're faced with a large, unpleasant assignment, it's preferable to get it out of the way as quickly as possible. You know the feeling, it is generally worse to think about and worry about something than to actually accomplish it. Taxes on income are no exception. You'll have to fill out the forms and file them, so the earlier it gets done the better.
There are several things you can do all year to be organized and get ready for tax season, which will help you to reduce stress throughout the year. For instance, setting up regular meetings with an accountant or bookkeeper throughout the year, or routinely saving business receipts in a secure location, can be smart places to start. Simple tasks like saving receipts can be done all year round and save you a ton of time and hassle when you need to find a receipt for something that happened in the first few months of the previous year.
3. You Can Get Your Refund A Lot Faster
The IRS processes refunds for electronically filed tax returns in about three weeks. The turnaround time for paper returns is approximately twice that, you can receive your money sooner if you file your tax return as soon as possible. If the government owes you money this year, you'll want to make sure you get every penny that's due to you—and filing early can help you achieve that. According to IRS data, taxpayers who file by late February receive much higher refunds—around $200 on average—than those who submit later.
Another reason is that the earlier you begin working on your taxes, the more time and documentation you'll have to make sure you're claiming all of the tax deductions and credits you're entitled to, which requires more time and effort than claiming the basic deduction. An accelerated return may be essential if you're currently battling with higher-than-average costs, especially if you're living paycheck to paycheck with no savings.
Consider a scenario in which you owe $1,200 in refund and are in danger of running up credit card debt to pay for your monthly expenses. Receiving that cash could mean the difference between having a ton of cash on hand to meet your bills and being compelled to carry a balance (on which you are charged interest).
4. Less Chance of Identity Theft
So you submit your return, only to realize that someone has already filed a tax return using your Social Security number, and the realization hits you that you have become a victim of tax refund fraud. It happens more frequently than you might believe. For example, the IRS prevented online tax criminals from stealing $26 billion in identity theft tax refund fraud between 2015 and 2019. While the IRS was able to foil the majority of the robberies, billions of dollars nevertheless wound up in the hands of the criminals.
Although filing early does not totally eliminate the risk of identity theft, it does protect your refund. The earlier you file your taxes, the less chance there is of someone trying to file a claim using your identity. A person who files their taxes early will already have their refund or be in the process of receiving one. The system will then log someone out if they attempt to access their account fraudulently. Tax frauds come in many varieties nowadays and can persist even after tax season. More details on numerous frauds are available on the IRS's Tax Scams/Consumer Alerts page.
5. More Time to Plan
It's natural to put off filing your income tax return as long as possible when you're facing a bill rather than a refund. However, if you fill out and file your tax returns now, you'll know precisely how much you owe—and you won't have to pay in full until Tax Day. Furthermore, the longer you have to come up with the money, the less likely you are to go over budget or deplete your emergency fund. So don't bury your head in the sand for the first half of the year. Get the facts on how much you owe, devise a strategy, and get that tax payment paid.
Note: Tax filers do not always receive a refund. If you owe the IRS money, you should be aware that you will be charged interest and penalties on the amount you owe if you don't pay it in full by the deadline of April 18.
The good news is that the IRS frequently sets up installment agreements for individuals who are unable to pay their bills in full. However, one of those would cost you money, therefore it would be wiser for you to pay off your tax debt before April 18. Additionally, if you submit your tax return early, you'll know how much money you owe and will have time to think of a strategy to raise it.
For example: Let's say Jack finishes his taxes two months before the due date and discover that he owes the IRS $600. He realizes that he might not have $600 in cash on hand. He then devises a plan to offer piano lessons over the next eight weeks to fund his bull, and by the tax deadline he would be able to have what he needs to pay his taxes- sans interest.
6. Get Your Paperwork on Time
If you're planning a major life transition, such as buying a house or going back to school, getting your tax return done ahead of time might save you time and money. Form 1040 information is used by college students to qualify for financial aid, and prospective homebuyers are frequently required to submit their completed tax return as verification of their household income. Whether you owe money or expect a refund, getting your tax return done early provides you a head start on the paperwork you'll need for these processes.
7. Eliminate the Need to File An Extension
You need plenty of time to organize your accounts and make sure you don't overlook any tax deductions that can help you save money. However, it's not always simple to estimate how long doing your taxes will take. Many people who put off doing something simply don't have enough time, and they end up requesting an extension.
Extensions provide you an additional six months to file your return, but they do not extend your deadline for making your tax payments. Therefore, you will still need to assess your debt and pay it. In fact, if you don't pay the whole amount due by the deadline of April 18, interest and penalties will be applied. Start the process early to avoid the headache of a delay.
What Do I Need to File My Taxes Early?
Depending on the complexity of your income and tax situation, you may need the following documents, among others, before you can file your return:
✔️ W-2 forms from wage-earning jobs.
✔️ 1099 forms from independent contractors or gig work.
✔️ 1099 forms from retirement, brokerage or dividend income.
✔️ Mortgage and property tax statements for itemizing deductions.
✔️ Charitable donation receipts and copies of medical bills for itemizing deductions.
✔️ Business expense receipts for Schedule C business deductions.
✔️ K-1 form for partnership income.
There you have it! I hope this was helpful and you take these tips into consideration.
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